Economic Optimism among Philippine midsized business reaches a new low

Economic Optimism among Philippine midsized business reaches a new low

As the pandemic continues to heavily weigh on the economy, the Economic Optimism among Philippine midsized business reaches a new low in the second half of 2020.

The P&A Grant Thornton International Business Report (IBR) said that among the 50 midsized Philippine businesses surveyed, almost half (49%) have either "a slightly or very optimistic outlook" for the next twelve months.

The second half figure was lower compared to the first half of 2020 which is 54%.

67% in the 2nd half of 2019 as well as the lowest 68% posted in the 1st quarter of 2016.

According to the IBR, unlike the Philippines, there was an improvement in the business optimism in the second half of 2020 around the world. It indicated that among the 10,000 businesses surveyed across 32 countries, 57% had an optimistic outlook for the next 12 months, an improvement compared to the 43% in the first half of 2020.

The pandemic caused a heavy impact on the Philippine economy in just the first nine months of 2020, the average shrank by 10%. A survey showed some Philippine businesses are becoming less hopeful about their growth prospects this year. Managers forecast the full-year economic contraction at 8.5-9.5%.

Grant Thornton stated that “with optimism steadily sinking among the mindset of mid-market leaders, other key indicators are also sluggishly turning downwards. ”

The Philippine business that was expecting profitability in the next year dropped three percentage points to 47% and those who were expecting a rise in revenues next year slipped two percentage points to 43%.

Contrarily, the percentage of firms that expect an increase in exports went up from 44% to 48%. Those anticipating more revenue from non-domestic markets jumped from 36% to 47%.

The IBR said that although businesses' employment will remain below pre-pandemic levels, the businesses that are expecting a boost in employment went up by six percentage points to 51%.

Around 47% expect finance shortages despite currency easings and financial support. As the top constraint to growing their business, more than half named economic uncertainty. Businesses continue to express concerns about economic restraints as different levels of lockdown restrictions remain in place.

“As optimism has decreased, this has materially flowed through to orders, with 56% citing shortage of orders as a constraint. Businesses are also concerned the ed about the availability of skilled staff and labor costs with 50% of businesses citing each as a constraint on their ability to grow,” the report said.

Businesses are, however, continuing to invest, especially in research and development (51%), staff skills (50%), and technology (47%).

Grant Thornton said, “With second and third waves of COVID-19 hitting many markets, the need to invest in enhancing an existing product portfolio, digital business models, and having people with the skills to operate in a virtual world for the foreseeable future continues to drive investment decisions. "

The overall data from P&A Grant Thornton Chief Executive Officer and Chairperson Ma. Victoria C. Españo showed that mid-market business leaders are realistic about the potential challenges in the first half of 2021. Global businesses expecting revenue increases jumped from 34% to 45%, while those expecting profitability went up to 44% from 32%. There has also been an increase from 28% to 38% with improving employment prospects.

“While the outlook is showing real improvement with both economic optimism and expectations around revenue and profits on the rise, it is important to note the context of these increases. In many cases the improvements we are seeing are due to firms benchmarking the next 12 months against the very depressed economic environment of 2020 due to COVID-19,” Ms. Españo said.

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